C.A.G. Insights

Intellectual Property Assignments in Employment Contracts: Employ Creative Thinking

If your business employs someone for their creative or technical abilities, you should strongly consider using an intellectual property assignment.  Intellectual property assignments can be part of larger employment contracts but, at a minimum, should clearly define ownership rights in the intellectual property created by the employee.  Such assignment clauses allow the employer to retain control of a work or invention by its employees. Like all contracts, employment contracts should be carefully worded to clearly convey the intent of the parties.

While state law generally governs the interpretation of employment contracts, the Court of Appeals for the Federal Circuit recently concluded that federal law determines whether an assignment clause within an employment contract vests legal title of future inventions in the employer or is merely a promise to assign.  In DDB Technologies, LLC v. MLB Advanced Media, LP, the court held that if a contract expressly grants rights in future inventions, “no further act is required [by the employer] once an invention comes into being.”  In other words, if the contract contains language expressly assigning all rights in future inventions to the employer, then such inventions are the property of the employer by operation of law.  Conversely, if a contract provides only a promise to assign, then a separate assignment must be executed before legal title passes to the employer.

In addition to inventions, copyrights are also subject to assignment in employment contracts. Federal law generally provides that the creator of a work is the legal owner except when a work is “made for hire.”  A “work for hire” includes works prepared by an employee within the scope of his or her employment as well as works created by an independent contractor or a freelancer pursuant to a written agreement.  In such a case, copyright ownership is initially vested in the hiring party and an author must ask for permission to use his or her own works unless he or she retained any rights in the employment agreement (or unless the use falls under one of the statutory exemptions).  However, it is often difficult to determine whether a work was prepared “within the scope of employment.”  The employment agreement can be used to clearly define what works are considered within the scope of employment.

In addition, the employment agreement may provide for automatic assignment of inventions or works that are outside the scope of the employee’s job description.  However, to the extent that the invention or work is unrelated to the employer’s business, such an assignment may be void as against public policy and/or in violation of a statutory restriction on such assignments. The law of the state governing the employer/employee relationship should be consulted in this regard.

From an employer’s perspective, intellectual property assignments should be worded to expressly and automatically convey all rights to future inventions and works relating to the employer’s business or anticipated research.  The intellectual property assignment should be signed before any invention or work is created.  An employee that desires to retain ownership and control of ideas or literary works should have the wording in the employment contract reviewed by an attorney prior to signing.

Any agreement that an idea or literary work falls outside the scope of employment should always be in writing.  As a precautionary measure, an employee could request an employer assign “any and all” interest it may have in particular intellectual property over to the employee.  If there is any doubt about who owns or will own any intellectual property created by the employee, the parties should attempt to reach an agreement prior to significant investment in the intellectual property.  Obtaining a written agreement early in the relationship is usually much simpler than litigating an ownership issue in court.

Celina Orr is an intellectual property attorney at Carstens, Allen & Gourley, LLP. She practices with an emphasis on patent prosecution and trademarks.

This blog is maintained by Carstens, Allen & Gourley, LLP to inform readers of recent developments in intellectual property. Solely informational in nature, this blog is not intended to create an attorney-client relationship or to be used as a substitute for legal advice or opinions. For more information, please visit www.caglaw.com

By Celina M. Orr